General Equilibrium Effects of Cash Transfers: Experimental Evidence from Kenya

Working Paper
Published on 22 December 2020

Abstract

How large economic stimuli generate individual and aggregate responses is a central question in economics, but has not been studied experimentally. We provided one-time cash transfers of about USD 1000 to over 10,500 poor households across 653 randomized villages in rural Kenya. The implied scal shock was over 15 percent of local GDP. We find large impacts on consumption and assets for recipients. Importantly, we document large positive spillovers on non-recipient households and rms, and minimal price inflation. We estimate a local transfer multiplier of 2.4. We interpret welfare implications through the lens of a simple household optimization framework.

Authors

Dennis Egger

University of California, Berkeley

Johannes Haushofer

Princeton University

Edward Miguel

University of California, Berkeley

Paul Niehaus

University of California, San Diego

Michael Walker

University of California, Berkeley